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N.B. Above Chart is abstracted from
NextView Program
Last week we said that, "While last week did provide good
daily trading range in stock markets, there was no clear direction as to
where the market is heading to. Last Friday trading was full of surprised.
Just when Asia markets like Hongkong, Singapore ... etc about to break down
their critical supports levels, Nikkei came in to rescue in the afternoon
and caused some rebounds in Hongkong and Singapore to stay above their
respective important support. Similarly in USA, Dow Jones Industrial did
sell down to a low of -120 pts, but again managed to rally back to +96 pts
towards closing on the news that a plan by several banks to bail out
struggling bond insurer Ambac Financial could be unveiled early next week.
So, is this a conspiracy or pure coincident? I don't know. All I know is the
battle between the Bulls and the Bears shall continue this week and may be
extended to next week too. However, we are very near to a deciding point for
both Bulls and Bears can no longer hold this equilibrium point forever."
True enough after a false broke up last Wednesday, the market was quick to
reverse and sold down fiercely on Friday. We also said that, "As for STI, we
could expect a stronger opening on Monday with support at 3019 and
resistance at 3130. The index will continue its range movement until USA
market provides a clearer direction." Again we were right to the dot! STI
was directionless in the early to middle of last week, but eventually broke
down on Friday. So, what could have next week? Will the market melt down
again since it had broken the support last Friday?
With Dow Jones Industries dropping
more than 300 pts last Friday, we could expect a big sell down in Asia on
Monday opening. The question now is how much further the sell down will be,
before a rebound emerge. Giving that last Friday was the first time the
market breaks the trading range, we could expect the selling to continue for
at least a few more days. We expect market will only begin to rebound near
15th March (the next Fed meeting), so for short term the market remains
bearish. Especially there are some important economic data to be release
this week, which are likely to be bad and could bring the index down
further. However, we had not witnessed any four consecutive months of
selling down since the beginning of the Bulls run in Oct'02. This is the
first time we have seen such thing happened. Hence a potential rebound is
really there, giving that the Fed meeting is only two weeks from now. Expect
market to continue selling down in the beginning of the week and may start
to rebound by end of the week. We need to see the momentum of the current
selling down, before understand their wave structure. The
reason that I am particularly interested in this juncture, is because the
winner will basically decide whether we are heading for a mild recession or
a deep depression! In technical term, it will provide a clearer picture as
to whether we are heading for a WAVE 4 of bigger degree before another bull
run OR we are heading for an A-B-C bigger degree melt down. I am confident
market will tell us a clearer direction in the next two weeks, and by then
we have plenty of time to decide our future investment strategy. Right now
the wiser choice is to stay sideline and wait for market to tell us the
direction! There are a series of economic data such as Monday's Feb data on
manufacturing, Tuesday's on service sector data and Wednesday's on
productivity & cost plus the all important non-farm payroll to be released
on Friday, there may move the market. As for STI,
we could expect a gap down on Monday opening. However, so long as the
support at 2859 did not break, there still have chance for the Bull to fight
back. So do stay tune and wait for the result on this battle between the
Bull and the Bear. As such, if you are intermediate term investor you should stay
sideline waiting for market to tell you the direction. As for traders, you may have to stay
short until some technical divergence emerge. For STI, the first
support is at 3013 follow by the next support at 2859.
The following are the support and
resistance to watch for Dow Jones, Hang Seng and Nikkei next week.
Dow Jones Hang Seng
Nikkei
Resistance 12767
24840 14100
Support 12069
23077 12900
As for STI the resistances and supports
are as follow:
Resistance: 3050, 3100, 3130, 3168,
3200, 3250
Support:
3020, 2950, 2930, 2850, 2746
Events To watch For The
Coming Week:
- The movement in Dow Jones
Industry and NASDAQ..
- The movement in
currencies, oil and
commodities price.
- The
economics data, such as Monday's Feb data on Manufacturing, Tuesday's on
Service sector data, Wednesday on Productivity and cost.
-
The
all important Non-farm payroll to be announced on Friday.
The following are two
possible wave counts on STI as at to-date:
- Preferred Count (60% probability)-- bullish count
My preferred count calling for a
top at 2502 (on 7/1/2000) as wave ((1)), it then follow by a two year
sell off on wave ((2)) to 1197 (on 28/9/2001). The index had then entered
into an impulsive wave ((3)) that ended at 3906. We are now in the
development of wave ((4)), of which we expect it to be a big triangle
formation that take about one to two years to complete. The recent sell
down is the first leg of wave ((4)), which will take a form of a-b-c and
reaches the potential target of 2770, as the wave (a) of ((4)). The
index will then continue to develop the (a)-(b)-(c)-(d)-(e) triangle
formation.
- Alternate Count (40% probability)--
bearish count
My alternate count calling
for a top at 2502 (on 7/1/2000) as wave ((1)), it then follow by a two
year sell off on wave ((2)) to 1197 (on 28/9/2001). The index had then entered
into an impulsive wave ((3)) that ended at 2666 in May 2006. The index had
then entered into wave ((5)) that ended on 3906 in October'07. We are
now in the downtrend bear market, which will last for a few years!
Although this count remains as the least chance as compare to my
preferred count. If the index breaks below 2776 convincingly on very
high volume, the odd on bear market will significantly increase.
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